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Indian Army

Indian Navy

Indian Air Force

Stars

Field Marshal

Admiral of the Fleet

Marshal of the Air Force

General

Admiral

Air Chief Marshal

Lieutenant General

Vice Admiral

Air Marshal

Major General
Rear Admiral

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Commodore

Air Commodore

Colonel

Captain

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Lieutenant Colonel

Commander

Wing Commander

Major

Lieutenant Commander

Squadron Leader

Captain

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Flight Lieutenant

Lieutenant

Sub-Lieutenant
Flying Officer

2nd Lieutenant (abolished)

Pilot Officer

Subedar Major/Risaldar Major

Master Chief Petty Officer I

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Subedar/Risaldar

Master Chief Petty Officer II

Warrant Officer

Naib Subedar/Naib Risaldar

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Petty Officer

Sergeant

Havaldar/Daffadar

Leading Seaman

Corporal
Lance Naik/Lance Daffadar

Seaman I

Leading Aircraftsman

Sepoy/Sowar

SKS Microfinance Ltd offers a range of products and services, which have been
developed based on the financial needs of working of poor women. We classify our
offerings into proprietary and distributor products.

Left

• Proprietary Products
• Distributor Products

Product Features Benefits

Income Loans range from Rs. 2,000 to Provides self-employed women

Generation Rs. 12,000 for the first loan;
Loans (IGL) - subsequent loan amounts
Aarambh determined by past credit history
and increased each in set
increments up to a maximum of
Rs. 30,000
financial assistance to support their
business enterprises, such as raising
livestock, running local retail shops
called kirana stores, providing
tailoring and other assorted trades
and services

Term of the loan is 50 weeks with

principal and interest payments
due on a weekly basis

12.5% - 15.0% flat interest

rate/26.7% - 31.4% annual
effective interest rate, including
upfront interest of 1%

Mid-Term Loan amounts range from Rs. Provides self-employed women

Loan (MTL) - 2,000 to Rs. 15,000 in each financial assistance to support their
Vriddhi annual cycle. business enterprises, such as raising
livestock, running local retail shops
 Available any time after the called kirana stores, providing
completion of 20 weeks & before tailoring and other assorted trades
40 weeks of an IGL cycle and services

Term of the loan is 50 weeks with

principal and interest payments
due on a weekly basis

12.5% - 15.0% flat interest

rate/26.7%-31.4% annual
effective interest rate, including
upfront interest of 1%

Emergency Interest free emergency loans

Loans and range from Rs. 500 to Rs. 2,000 Designed to meet the unforeseen
Advances - emergency requirements of members
Raksha Term of the loan is 20 weeks with
a bullet repayment Disbursed within 24 hours of request

Interest free funeral advances of Funeral advance paid to a member’s

Rs. 1,000 adjusted out of the family upon the death of the member
claim settlement of loan cover or her spouse
insurance

Life Insurance Interest free loans of Rs. 500 Issued to members to pay their life
Loans insurance premiums during the
Term of 25 weeks with principal initial 25 week period
repaid weekly
Helps to promote habit of savings
and reduction of vulnerability among
members

Mobile Loans Financing of mobile phones and Provides financing for mobile
telephone services phones and telephone services to our
members
Maximum loan amount of Rs.
2,000

12.5% - 15% flat interest

rate/30.6% - 36.2% annual
effective interest rate

Term of 25 weeks with principal

and interest repaid weekly

Sangam Store Working capital loans ranging Provides a working capital loan to
Loans from Rs. 5,000 to Rs. 25,000
Interest free
Term of the loan is 14 days
fund the needs of our members who
own and operate kirana stores
The program allows these members
to purchase their inventory of
consumer goods and groceries from
a national wholesaler at wholesale
prices

Housing Loans Loans range from Rs. 50,000 to Provides financial access to women
Rs. 150,000 for construction of new houses or
improvement & extension of existing
Members must have completed at houses
least 3 IGL cycles to qualify or
one ILP to be completed

Term of loan is 3 to 5 years with

principal and interest payments
due on a monthly basis

11.9% flat interest rate, 21%

annual effective interest rate

In addition, loan processing fee of

2% collected upfront

Per RBI circular DNBS. 204/CGM (ASR)-2009 dated January 2, 2009, SKS’s Board of
Directors has discussed and formally adopted an interest model based on cost of funds,
operational costs, and risks involved for each product.

he Sangam Stores project is aimed at providing working capital finance to SKS members
who own small ‘kirana’ stores. With credit supplied by SKS, shopkeepers can buy
consumer goods and groceries through a dedicated third-party vendor. This relationship
gives access to quality products at competitive prices that are delivered straight to their
shops. Our members save time and transport costs normally spent on buying goods from
local markets. SKS is partnering with Metro, the German wholesaler, which supplies
member kiranas from a special inventory of 250 SKUs. Under this project, SKS generates
and aggregates demand from kirana store owners, in addition to supplying credit to them.
This pilot is the first step towards creating a vibrant distribution network across sections
of society currently not serviced by manufacturers.
 Many SKS members have asked for larger loans to make
improvements on their homes or build new ones. SKS has launched a housing loan pilot
for members who have been with SKS for a minimum of three years. Members can repair
their houses, such as changing a thatched or asbestos roof to RCC, or make
improvements such as building a latrine or adding an extra room. The loan has a
repayment period of three to five years as per the repayment capacity of the members.
SKS is currently carrying out a pilot programme in rural markets with support from
HDFC and hopes to roll out housing loans more widely in the next financial year.

SKS has partnered with Hindustan Unilever to provide Pureit water

filter devices to our members. SKS provides the loan to make the water filter affordable
and HUL provides the distribution, installation, and servicing that ensures our members
have access to clean water. SKS is currently assessing the learning from our pilot
branches and will determine a rollout plan to reach our members pan-India in the coming
months.

Most of our members live in areas that have erratic power supply
forcing business and normal lifestyle to come to a halt with sunset. Solar-powered
lighting gives our members the opportunity to be independent from unreliable, low-
voltage electricity grids or to light their homes if theirs are currently u

SKS has identified the barriers to scaling microfinance – what it calls the 3 Cs of Capital,
Capacity and Costs – and has taken an innovative approach to overcome these barriers.
These three principles, using a profit-oriented model, drawing on best practices from the
business world for scaling and using technology have helped us create a new generation
of microfinance institution and enabled us to reach numbers that otherwise the
microfinance sector has not seen before.

Many believe that microfinance should be a “social business”, meaning investors should
get their investment back but no profits. SKS has a different view. If the microfinance
industry is going to provide the estimated INR 2,399.35 billion (USD 51.4 billion) of
credit needed by the poor, it must tap commercial capital markets – and that means
structuring microfinance so that investors can expect a return on their investment. That is
why SKS converted from a non-profit NGO to a –profit Non-Banking Financial
Company (NBFC) – regulated by the Reserve Bank of India – in 2005.

With rapid scaling comes the challenge of building organisational capacity. Rather than
look at conventional microfinance models, SKS based its business strategy on principles
borrowed from fast-scaling consumer businesses. SKS standardised its products and
front-line processes and adopted factory-style training models that have helped corporate
giants scale up rapidly – thereby boosting our own workforce capabilities and growth.

SKS Microfinance firmly believes that technology is one of the key enablers for scaling
microfinance. For SKS, technology is an investment that is adding value to what and how
we offer financial solutions to our members. SKS Microfinance is among the first to
develop and deploy an industry standard MF technology platform in-house, delivering
superior value to our end customers. The systems designed and deployed at SKS have
enabled the business to grow rapidly since its simple to use, saves time, is accurate and
allows for data highlights to be transferred to head office when needed. SKS is now
investing in putting up a robust IT backbone with a world class data backup centre
delivering mission critical services and connectivity across our branch offices to manage
the next phase of growth. The new agile and scalable technology architecture is capable
of handling the challenges specific to the microfinance sector. A web-based Business
Intelligence portal using state-of-art technology and a highly flexible and scalable
platform has also been deployed

We believe that the most important way to improve the lives of the poor is through economic
development. It is the foundation on which other human development - such as education and
health - can be built. At SKS we are proud of improving the lives of more than 6 Million
members through microfinance, which in turn fosters economic development. Each member is
able to use microfinance to make a better life for herself and her family. Microfinance enables
people to earn income and build assets, which means families eat better, they can afford health
care, and children are more likely to attend school.

Within the microfinance sector, SKS has been able to distinguish itself through its performance.
We have successfully applied methods from the business world, such as the use of
standardisation and automation, to build an organisation that leads the microfinance industry in a
number of areas, including rapid growth, high quality service to our members, streamlined
delivery, transparency and innovative products.

Operational Information FY10 FY09 FY08 FY07

Total no. of Branches 2,029 1,353 770 276

Total no. of Districts 341 307 219 103

Total no. of Staff 21,154 12,814 6,818 2,381

Total No. of Members (in '000) 6,780 3,953 1,879 603

Amount Disbursed for the period (INR crores) 7,618 4,485 1,680 452

Portfolio outstanding (INR crores)* 4,321 2,456 1,051 276

* includes assigned loan portfolio

Financial Information FY10 FY09 FY08 FY07

Revenue (INR crores) 958 554 170 45

PAT (INR crores) 174 80 17 2

Assets (INR crores) 4,055 3,039 1,089 335

Networth (INR crores) 950 664 212 71

© Copyright 2009 SKS Microfinance, All rights reserved.

SKS Microfinance follows the Joint Liability group Model. The methodology involves
lending to individual women, utilising five member groups where groups serve as the
ultimate guarantor for each member.

Our approach is to provide financial services at the doorstep of members in villages and
urban colonies. This allows the poor convenience and savings in terms of cost and time
associated with travelling to mainstream banks and enables SKS staff to promptly and
fully collect repayments.

Our loans are designed for convenience with small weekly repayments corresponding to
cash flows. Small first loans inculcate credit discipline and collective responsibility.
Interest and loan repayments are simplified for easy comprehension.

From village selection to loan disbursal, SKS follows a clear process in its operations.
Details of our operational methodology are captured below :
Before starting operations, our staff conduct village surveys to evaluate local conditions
like population, poverty level, road accessibility, political stability and means of
livelihood.

After a village is selected, SKS staff introduces the community to its mission,
methodology and services.

Follow-up with interested women, and direct appeal to those who may not have attended
earlier because of religious, class, caste or gender barriers.

Women form self-selected five-member groups to serve as guarantors for each other.
Experience has shown that a five-member group is small enough to effectively enforce
group peer pressure and, if necessary, large enough to cover repayments in case a
member needs assistance.

CGT is a four-day process consisting of hour-long sessions designed to educate clients on

SKS processes and procedures and to also build a culture of credit discipline. Using
innovative visual and participatory teaching methods, SKS staff introduces clients to our
financial products and delivery methods. CGT also teaches clients the importance of
collective responsibility, how to elect group leaders, how to affix signatures, and a pledge
that serves as a verbal contract between SKS and its members. During this training
period, SKS staff collects quantitative data on each client to ensure qualification
requirements are met, as well as to record base-line information for future analysis. On
the fourth day, clients take a “Group Recognition Test” conducted by a different staff
member than the one who trained them. If they pass, they are officially accepted as SKS
members.

As additional groups are formed within a single village, a Centre (sangam) emerges.
During Centre Formation, groups are combined to form a centre of 3 to 10 groups or 15
to 50 members. Weekly Centre meetings serve as a time to conduct financial transactions.
Meetings are held early in the morning, so as to not interfere with clients’ daily activities.

A leader and deputy leader are selected to facilitate meetings and ensure compliance with
SKS procedures. In addition to financial transactions, members use the weekly meetings
to discuss new loan applications and community issues. Centre meetings are conducted
with rigid discipline in order to sustain the environment of credit discipline created
during CGT.

SKS Microfinance firmly believes that Technology is one of its biggest differentiator in
the industry. For SKS, Technology is an investment that is adding value to what and how
we offer financial solutions to our customers. SKS Microfinance is among the first to
develop and deploy an industry standard MF technology platform in-house, delivering
superior value to our end customers. The systems designed and deployed at SKS have
enabled the business to grow to nearly 6.78 Million customers and are providing the
technology foundation to achieve the next phase of growth.

SKS has designed and deployed a web-based Business Intelligence portal using state-of-
art technology and a highly flexible and scalable platform to support the business growth
and operations.

SKS Microfinance has also built an integrated and encrypted MPLS communication
network encompassing a world class Data Centre delivering mission critical services and
enhancing collaboration across the organisation, thus ensuring superior service quality to
its customers.

SKS has entered into strategic partnerships with various technology leaders and
innovators like Microsoft, Wipro, Reliance, HCL and Sify to establish an agile and
scalable technology architecture that is capable of handling the challenges specific to the
microfinance sector.

Sangam Leader Meetings provide an interactive platform for SKS members. Thousands
of our centre (sangam) leaders help in gathering member feedback on SKS services and
help us better understand their needs. In FY09, through the 150 Sangam leaders meeting
conducted, we managed to reach out to approximately 60,000 Sangam leaders
representing 2.8 million members in the states of Andhra Pradesh, Karnataka,
Maharashtra, Orissa, West Bengal, Madhya Pradesh, Chhattisgarh, Gujarat, Rajasthan
and parts of Uttar Pradesh. Special desks and suggestion boxes are set up at the SLMs
where member feedback and issues are registered and addressed. Surveys on existing
products happen at every SLM. These sessions also help members understand and know
SKS better. The SLMs are a great way to connect with our members and build brand
loyalty. Many of our new initiatives like retail insurance, education and housing projects
are an outcome of feedback and inputs received at SLMs. SKS expects to conduct SLMs
every year across all operating states.
We are piloting a dedicated toll-free phone number for our members. This service will
help members register their complaints and issues, as well as obtain information on
existing products and services. The toll-free number service is monitored by a dedicated
team which ensures that issues and complaints registered, are resolved in a timely
manner. Software and other tools have been developed to ensure smooth operations. The
service will be rolled out in phases in the coming months.

We obtain feedback from group leaders through pre-paid postal letters. The letters are
pre-printed in vernacular languages with well-defined fields where group leaders provide
feedback. In the first phase of this initiative, more than 65,000 letters have been
dispatched to group leaders of selected branches in Andhra Pradesh, Karnataka, Bihar,
Uttar Pradesh and West Bengal. Nearly, 4,000 of these letters have been received and
data is being collated.

Business Basics at the Base of the Pyramid

by Vikram Akula
Why should business among the very poor be different than it is anywhere else? Listen to
customers, standardize processes, and don’t be afraid to make a profit.
Read the Executive Summary

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It’s not every day that a fellow who runs a $250 million financial services firm has a
fatwa, or Islamic religious ruling, issued against him. But that’s what happened four years
ago when my then $7.3 million company, SKS Microfinance, started doing business in
Nizamabad, India. Armed with broken bottles and machetes, a gang of local thugs
intimidated, attacked, and stole cash from some of our loan officers. They tried to extort
money from us in exchange for permitting SKS to operate safely in the region. When we
refused to pay, they spread rumors that we were trying to convert people to Christianity.
The fatwa, handed down by local clerics, said it was a sin to borrow from us.

We knew if we became complicit with a culture of extortion, our customers would be the
ones to suffer. They barely had enough money to meet basic needs, never mind pay off
bad guys. So we walked away from our $285,000 portfolio in Nizamabad. By not giving
in to the thugs, however, we won some respect in that town and in other villages where
we were doing business.

Many companies say they protect the interests of their customers. Very few actually sit in
the dirt with them, using stones, flowers, sticks, and chalk powder to figure out if they’ll
be able to repay a $20 loan at $1 a month. With this approach, we’ve created our own
loyal “gang” of over 2 million customers.

SKS is like any other healthy high-growth business, except that our customers have
almost no money. Consider the plight of Saryamma: She and her husband were landless
laborers who earned about $1 a day. Persistent drought often made work and food scarce.
Saryamma’s husband entered into bonded labor, a form of indentured servitude that still
exists in India, just so the family would have enough money for grain. Her oldest son was
forced to seek work rather than attend school.

In 2002, Saryamma joined our program and recruited four other women from her village
who wanted loans. In line with our group-lending model, each loan was linked to the
others: If one woman couldn’t pay her small weekly installment, the rest of the women
chipped in; if she refused to pay, the others pressured her into meeting her obligation.
Saryamma initially borrowed $200 to buy a buffalo so she could sell the milk. She took
one year to repay, in weekly increments of $4.50. In subsequent years, she took out other
capital loans, eventually adding three more buffalo, a cow, two acres of land, and a pair
of bulls to her portfolio. Her family’s net income has increased to $10 a day, propelling
her firmly into India’s lower middle class. Her husband is now free from bonded labor,
and Saryamma’s youngest children are the first in the family to attend school.

Saryamma’s story illustrates that providing loans to women is a sure way of making
microfinance work. Studies have shown that women are more likely than men to reinvest
profits in the household and to support others in their borrowing group. That’s why we
lend only to women.

How do we manage to help women like Saryamma on such a large scale? From the
beginning, SKS’s deliberate strategy has been to bypass the usual conventions of
poverty-eradication programs. By reenvisioning microfinance, we have achieved
excellent customer and business relationships throughout India.

Rethinking Microfinance

A fatwa is hardly the only scary thing my company has encountered on its path toward
rapid growth. Much more worrisome is the slow rate at which our industry has been able
to gain traction and deliver broadly on its promise.